IMF to clear Pakistan’s $800 mn second tranche

Islamabad, Feb 25 (DPA) The International Monetary Fund (IMF) will approve a second $800 million tranche of its $7.6-billon loan to save Pakistan from defaulting on external payments, a senior official said Wednesday. “The Executive Board of the IMF will approve the second tranche for Pakistan by the end of March,” Pakistan’s Finance Secretary Waqar Masood told DPA from Dubai, where the two sides concluded their talks.

The two teams agreed on all major macroeconomic targets for the fiscal year ending on June 30 as they reviewed financial targets set for the country to qualify for the second tranche of the IMF loan approved in November 2008.

The IMF said Pakistan was on track to comply with its economic programme. But, it warned, “the deterioration in the global economic environment and weaker economic activity call for an update of the economic framework and a recalibration of economic policies”.

A senior Pakistani official privy to the talks, who spoke on condition of anonymity, said the country’s GDP target had been revised downward from 3.5 percent to 2.5 percent for the ongoing fiscal year, as suggested by the IMF.

Officials from the world organization and Pakistan also agreed to envisage a GDP growth target of 4 percent for the 2009-2010 fiscal.

Pakistan’s central State Bank would decrease discount rates by March if inflation was brought down. Otherwise, a tight monetary policy would continue in the remaining period of the ongoing fiscal, official sources said.

Pakistan, a key ally of the West in the war against terrorism, is witnessing a deteriorating law and order situation with growing militancy in its volatile tribal areas, affecting foreign investment.

The country approached the IMF last year for a rescue package as it grappled with a 30-year high inflation rate and fast-depleting reserves that held barely enough to cover nine weeks of import bills.

Pakistan has requested a raise of $4.5 billion to the approved $7.6-billon loan in the ongoing talks with the organization. It was not clear whether the request was commended.